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2015 Retirement Plan Cost of Living Adjustments Announced by IRS

The IRS released the 2015 Cost of Living Adjustments for various limitations affecting retirement plans on October 23, 2014. The changes affect both qualified retirement plan and IRA contributions and benefits. Highlights of the 2015 adjustments include:

Maximum 401(k) contribution is increased to $18,000, and the catch-up limit (age 50+) is increased to $6,000, a total of $24,000 for seniors.

Maximum Profit Sharing Plancontribution is increased to $53,000.

Maximum Compensation that is considered to determine contributions and benefits is increased to $265,000.

Maximum IRA Deduction remains $5,500 + catch-up of $1,000 ($6,500 for seniors). Deduction for participants in an employer plan is reduced based on AGI. The AGI threshold is increased $1,000 for singles, and $2,000 for married couples, which allows the full deduction with AGI up to $61,000 for singles, and $183,000 for married couples

Other limitations that have significant impact on contributions and benefits have also been increased. A more detailed description may be found in the tables below.

2015 Qualified Plan Cost of Living Adjustments

Description

Code Section

2015

Maximum Annual Payout from a Defined Benefit Plan

415(b)(1)(A)

$210,000

Maximum Annual Contribution to a Defined Contribution Plan

415(c)(1)(A)

$53,000

Maximum Elective Deferrals under §401(k) and §403(b) Plans

402(g)

$18,000

Catch-up Contributions age 50 (401(k) & 403(b) Plans)

414(v)(2)(B)(i)

$6,000

Catch-up Contributions age 50 (SIMPLE Plan)

414(v)(2)(B)(ii)

$3,000

Maximum Annual Compensation Taken into Account for Benefits and Contributions under a Qualified Plan

401(a)(17)

$265,000

Compensation Test – Highly Compensated Employee

414(q)

$120,000

Compensation Test – Key Employee (Top Heavy)

416(i)(1)

$170,000

Government and Tax-Exempt Plans Deferral Limit

457(e)(15)

$18,000

Maximum contribution to SIMPLE Retirement Account

408(p)(2)

$12,500

Social Security Integration Level (Contribution and Benefit Base under §230 of Social Security Act)

401(l)(5)

$118,500

2015 Cost of Living Adjustment to IRA Limitations

Description

Code Section

2015

Maximum Deductible IRA Contribution

219(b)(1)(A)

$5,500

Catch-up IRA Contributions age 50 or over

219(b)(5)(B)

$1,000

Maximum Roth IRA Contribution

contribution is reduced for AGI>

408A(c)(2)(A)

$5,500

Roth AGI threshold for married couples

408A(c)(3)(c)(B)(ii)

$183,000

Roth IRA AGI threshold for all others

408A(c)(3)(c)(B)(ii)

$116,000

Maximum contribution to SEP – lesser of 25% of Compensation or

415(c)(1)(A)

$53,000

Minimum compensation for SEP coverage

408(k)(2)

$600

Maximum compensation for SEP

408(k)(3)

$265,000

THE DEDUCTIBLE CONTRIBUTION LIMIT IS REDUCED FOR ACTIVE PARTICIPANTS IN AN EMPLOYER SPONSORED RETIREMENT PLAN, BASED ON THE CONTRIBUTOR’S AGI. (Table below) In the case of married taxpayers filing jointly, if one spouse is an active participant, the reduction in the maximum contribution limit is calculated separately for the participant spouse and non-participant spouse.